The fourth-largest supermarket chain in the country expects to be profitable by 2017 despite high debt burdenSagar Malviya | ET Bureau | December 05, 2016, 09:41 IST

Image source: ThinkstockAditya Birla Retail, the operator of ‘More’ supermarkets, reported a 21% increase in sales in the previous financial year, although losses continued to pile up due to high finance and borrowing costs.

The retail arm of the Aditya Birla Group posted Rs 3,509 crore in sales for the year ended March 2016, while the loss widened to Rs 649 crore, according to company filings with the Registrar of Companies last week.

Aditya Birla Retail had debt of about Rs 5,936 crore, while finance costs were Rs 417 crore during the year.

The accumulated debt was mainly due to the acquisition of Trinethra and Fabmall a decade ago and Jubilant’s Total Super Store last year.

ABRL said it expects to become profitable at the company level by next year. “We had strong double-digit, like-to-like growth based on various initiatives focused on the consumer experience, both in terms of assortment and service,” said a company spokesperson. “ABRL is already profitable at the store level.”

The fourth-largest supermarket chain in the country ended the year with 487 ‘More’ branded supermarkets and 19 hypermarkets.

The company reduced its operating loss by 7.4% to Rs 108.8 crore in the year ended March 2016.

The group entered retailing in 2007 with the acquisition of Trinethra Retail, which it merged with ABRL three years ago.

The group restructured its retail business by carving out the apparel-making Madura Fashion & Lifestyle division from Aditya Birla Nuvo and merging it with listed loss-making Pantaloon Fashion and Retail. This created the country’s largest branded apparel company by sales and number of stores.

Unlike food and grocery, which operates on wafer-thin margins, apparel retailing is a lucrative business with margins as high as 30%. Aditya Birla Group is by far the market leader with brands such as Allen Solly and Van Heusen.

Experts said ABRL’s strategy of focusing on profitable markets helped it cut operating losses. In May, AB Group Chairman Kumar Mangalam Birla passed a resolution to invest Rs 500 crore in the food and grocery business and increase its authorised capital to Rs 750 crore.

“Considering the future growth prospects on the company, it is estimated that the company will require additional fresh funds of up to Rs 1,500 crore during financial year 2016-17,” it said in the latest annual return filing.